Claims · 6 min read

5 reasons cyber claims get denied

Insurance only helps if it pays. The good news: the most common reasons a cyber claim gets denied aren't bad luck or fine-print trickery — they're conditions you can check and fix today.

1. No multi-factor authentication (MFA)

This is the big one. Many cyber policies now make MFA a condition of coverage for ransomware and funds-transfer claims. If you attested that you had it and you didn't — or you had it on email but not on remote access — the insurer can decline. MFA is cheap, fast to roll out, and the single highest-leverage thing you can do to keep your policy responsive.

Fix: turn on MFA everywhere that matters — email, banking, VPN/remote access, and admin accounts — and make sure your application answers match reality.

2. A known vulnerability you didn't patch

If attackers got in through a flaw that had a patch available and you hadn't applied it, that's a common denial ground. "We were busy" isn't a defence the policy recognizes.

Fix: enable automatic updates where you can, and retire end-of-life systems that no longer receive security patches.

3. Voluntary transfer of funds (without the right endorsement)

When an employee is tricked into sending money — a fake invoice, a spoofed CEO email — many policies treat it as a "voluntary" transfer and exclude it unless you've specifically added social-engineering coverage. People assume "fraud is fraud." The policy often disagrees.

Fix: confirm you have a social-engineering endorsement, know its sublimit, and add a simple internal rule: any payment change or new wire instruction gets verified by phone, using a known number — never the one in the email.

4. A third-party vendor breach the policy excluded

Your IT provider, payroll processor, or cloud vendor gets breached and your data goes with it. Some policies cover this; others exclude third-party/dependent breaches entirely — leaving you exposed for a failure that wasn't even yours.

Fix: check whether your policy extends to vendor incidents, and ask critical vendors whether they carry cyber coverage. You're only as protected as your weakest supplier.

5. You didn't maintain a control you said you would

Policies increasingly require you to keep certain safeguards in place — tested backups, endpoint protection, a defined process. If a claim reveals you let one lapse, that can be enough to deny. Insurers are auditing the application against reality more than they used to.

Fix: treat your application answers as ongoing commitments, not a one-time form. If something changes, tell your broker.

By J.R. Genua, CCIS — Certified Cyber Insurance Specialist. Adapted from the free guide Cyber Risk & Canadian SMEs.